23 IntroductionShackelford and Shevlin (2001) limit their review to research published in accounting outlets and describe the development of the relatively young archival, microeconomic-based income tax literature that arose from the Scholesand Wolfson framework.Maydew(2001) emphasizes the need for tax researchers in accounting to think more broadly and to incorporate more theory and evidence from economics and finance.Tax research has along history in many disciplines.The goal in this paper is to integrate the theoretical and empirical tax research from accounting, economics, and finance, to summarize what is known and unknown, and to offer suggestions for future research.

24 Informational role of AFITA taxonomy of the literature and review of the evidenceInferences from book-tax differences about current and future earnings.Are earnings managed through the tax accounts?Do changes in the valuation allowance reveal manager’s private information about future performance?Sources of differences between book and taxable incomeThe informational role of accounting for income taxesBook-tax conformitySummary and suggestions for the future

28 Tax & Corporate DecisonInvestmentTheory of investment and taxes: a brief backgroundTaxes and investment: some evidenceInvestment in intangiblesInvestment location decisionsThe reinvestment or repatriation decisionCorporate inversions to tax havensSummary and thoughts for future researchCapital structureEstimating the tax benefit of debtMeasuring leverageSummary and thought for the futurePayout policyTaxes and other dec: transfer pricing, aquistioan and compensationTransfer pricingMerger and aquisitionExecutive compensationExecutive tradingTaxes, book-tax tradeoffs, and real corporate decisionsOrganizational formThe choice of organizational formSummary and thought for future research

30 Research in Accounting for Income TaxesEarnings managementEarnings characteristics, and the equity market pricing of information in the tax accounts.Research in Accounting for Income TaxesThe association between book-tax differencesGraham, et al. (2011)

40 Book Tax GapThe Persistence and pricing of earning accrual, and cash flows when firms have large book tax difference, Michelle Hanlon, The Accounting Review, Vol 80 No 1, (2005) pp

41 Book Tax GapTax Avoidance, Large Positive Temporary Book-Tax Differences, and Earnings Persistence, Bradley Blaylock, Terry Shevlin, Ryan J. Wilson, The Accounting Review, Vol. 87, No. 1 (2012), pp. 91–120ABSTRACT: We investigate why temporary book-tax differences appear to serve as a useful signal of earnings persistence (Hanlon 2005). We first test and show that temporary book-tax differences provide incremental information over the magnitude of accruals for the persistence of earnings and accruals. We then opine that there are multiple potential sources of large positive book-tax differences. We predict and find that firms with large positive book-tax differences likely arising from upward earnings management (tax avoidance) exhibit lower (higher) earnings and accruals persistence than do other firms with large positive book-tax differences. Finally, we find significant variation in current-period earnings and accruals response coefficients and insignificant hedge returns in period tþ1, consistent with investors being able to look through to the source of large positive book-tax differences (earnings management and tax avoidance), allowing them to correctly price the persistence of accruals for these subsamples.

42 Book Tax ConfirmityAtwood, T.J., Drake, M.S., & Myers, L.A. (2010). Book-tax conformity, earnings persistence and the association between earnings and future cash flows. Journal of Accounting and Economics, 50, 111–125.Calls for eliminating differences between accounting earnings and taxable income in the US have been debated extensively. Proponents of increased book-tax conformity argue that tax compliance will increase and earnings quality will improve. Opponents argue that earnings quality will decline. We examine whether the level of required book-tax conformity affects earnings persistence and the association between earnings and future cash flows. We develop a comprehensive book-tax conformity measure and find that earnings have lower persistence and a lower association with future cash flows when conformity is higher. Our evidence suggests that increased book-tax conformity may reduce earnings quality.

43 Book Tax ConfirmityHome country tax system Characteristics and corporate tax avoidance: international Evidence, T.J. Atwood, Michael S. Drake, James N. Myers Linda A. Myers, The Accounting Review, ol 87, No 6 (2012) ppWe examine whether three tax system characteristics—required book-tax conformity, worldwide versus territorial approach, and perceived strength of enforcement— impact corporate tax avoidance across countries after controlling for firm-specific factors previously shown to be associated with tax avoidance (i.e., performance, size, operating costs, leverage, growth, the presence of multinational operations, and industry) and for other cross-country factors (i.e., statutory corporate tax rates, earnings volatility, and institutional factors). We find that, on average, firms avoid taxes less when required book-tax conformity is higher, a worldwide approach is used, and tax enforcement is perceived to be stronger. However, the relations between tax avoidance and all three tax systems characteristics are contextual and depend on the extent to which management compensation comes from variable pay, including bonuses, stock awards, and stock options.